PS: Airlines & Aviation, Hospitality & Travel, Retail, Service, and Commercial Real Estate. I believe anywhere that large groups gather or travel to (convention and vacation, i.e. gateway cities) have been the most affected and will continue to struggle until confidence is restored where everyone begins traveling and spending again.
Q: With PPP loan money exhausted and the moratorium on commercial renters subsiding soon, what will be the response by creditors?
PS: The creditors will use collection agencies, in-house legal departments, and outside law firms to collect their past due rents. Remember, most of the commercial properties have mortgages and those need to be paid. Delinquencies can be seen across many industries including hotel, retail, office, and mixed use. Certainly industrial and healthcare, however, have held up quite well as warehouses, distribution centers, cell towers, hospitals, etc. have been less affected by the pandemic.
Q: Credit professionals must stay ahead of slow payments and bankruptcy while situationally providing term flexibility. What is the best way to avoid delinquency and write-offs?
PS: I believe credit professionals need to stay informed by reading as much industry news as possible; they should understand how their customers and competitors’ businesses have been affected by this economic downturn. I also think they should be willing to listen to economists who are trained to forecast future scenarios that may arise. In the same vein, you should use highly accurate financial risk models that can predict bankruptcy, otherwise you could be blindsided by a filing. Lastly, you must work with your customers to the extent that makes sense for your company. If you can provide some relief to your customer by restructuring or discounting that will give the customer a way forward.
Q: What are the key advantages of relying upon highly accurate and timely financial risk models, such as the FRISK® score?
PS: The key advantages is that these financial risk models have proven that they are 1) extremely accurate and 2) the work to determine risk and creditworthiness has already been done. The information is all calculated with public data that updates the model on a daily basis, which is incredible. These models regularly save credit, financial, and risk professionals an enormous amount of time and their companies a lot of money by avoiding expensive write-offs.
Q: What are the major benefits of contributing trade receivable data?
PS: Companies need data to make the best business decisions. Without trade data, the credit decision process becomes very slow and it creates more work for analysts. Sharing trade credit data protects all creditors and suppliers. This trade information will cover all of your public and private counterparties.
Extraordinary insight can be garnered by combining the trade receivable data and financial risk models in order to stratify risk by dollars. Whenever possible, share trade with providers that compare trade experiences with other companies doing business with the same counterparty.
Q: Credit and collections will likely be challenging in the years ahead. What’s some advice you can give to customers and creditors?
PS: Educate yourself, understand the basics of commercial credit and collections and how it affects your business and your customers’ businesses. Talk to experienced credit and collection professionals and a lawyer to make sure you are using best practices. Finally, have an industry-leading financial risk model at your fingertips and always work with the correct forms, policies, and resources.
The COVID-19 pandemic has led many businesses, particularly large public companies, to issue more debt in an effort to stave off cash crunches. Some corporations have filed bankruptcy, while other highly leveraged entities are only stalling the inevitable. To properly manage this environment, professionals need to follow industry best practices. According to Patrick Spargur, you should:
- contribute all of your trade receivables data,
- utilize only high quality financial risk modeling,
- read industry and company news frequently,
- and use proper documentation and protocols
Patrick Spargur has 30+ years in credit & collections. His employer is Rauch Milliken International, a nationally recognized third-party collection firm that works with numerous Fortune 500 companies to collect past due receivables.
You can contact Patrick Spargur for more information by email at firstname.lastname@example.org or by phone at 888-705-3688.